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Indian equity markets took a sharp U-turn on Tuesday, a day after recording their biggest single-day gain in over four years. The BSE Sensex tanked 1,282 points, or 1.55 per cent, to close at 81,148, while the Nifty50 shed 346 points, or 1.39 per cent, ending the day at 24,578.

This profit-taking eroded Rs 1.51 lakh crore in investor wealth, with the total market capitalisation of BSE-listed firms falling to Rs 431.05 lakh crore.

Monday’s surge—driven by optimism around a temporary ceasefire between India and Pakistan—saw indices jump nearly 4 per cent. But Tuesday saw sharp profit-booking, especially in frontline stocks. Experts noted that Monday’s rally was largely fuelled by short-covering and retail/HNI flows, rather than strong institutional participation.

“FIIs and DIIs bought only Rs 2,694 crore on Monday. This indicates the move was not backed by sustainable institutional flows,” said Dr. VK Vijayakumar of Geojit Financial Services.

Easing trade tensions between the US and China improved global sentiment. But for India, the easing removes a key narrative—supply chain diversification towards India. As the US and China move towards tariff cuts and deeper cooperation, the ‘China+1’ opportunity that once favoured India now seems slightly diluted.

Brent crude prices jumped to a two-week high at $64.74 per barrel on Monday before slipping slightly on Tuesday. A sustained rise in crude increases India’s import bill and adds inflationary pressure, which is typically negative for equities.

The US 10-year Treasury yield rose to 4.457 per cent, making US assets more attractive and putting pressure on emerging markets. This global risk-off sentiment also led to capital outflows from Indian equities.

HDFC Bank, Infosys, ICICI Bank, Reliance, Kotak Bank, and TCS were among the top drags. After Monday’s sharp upmove, IT stocks in particular saw heavy profit booking—Infosys and TCS both declined after gaining 8 per cent and 5 per cent respectively on Monday.

Analysts say the market may remain range-bound with high volatility in the near term, as global cues remain mixed and domestic triggers begin to fade. Investors are advised to stay selective and focus on quality names.

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